Pensions: Important Economic Drivers

for Our Communities

Retirement security and pensions for public employees and first responders are a proven investment in our local communities.

Originally printed in The Patch:

As a longtime firefighter in Cicero, I often meet neighbors and families on their worst days when they have lost everything – homes, pets, even loved ones. Helping people through those trying times of need is what drove me to this profession. I know the same is true for countless others who choose a life of service.

First responders are the backbone of our community. Our police, firefighters, and paramedics run towards danger, while others run to safety. We owe the workers who keep us safe a great deal of gratitude for their dedication, responsiveness, and commitment. Their physical, mental, and emotional sacrifices allow our communities the opportunity to thrive.

Given the intense demands that often accompany these professions, it is crucial that we not take our first responders for granted. Compared to the average population, firefighters have shorter life expectancies and are three times more likely to die on the job. We are also exposed to harmful chemicals that cause a greater risk for many cancers. These factors increase the importance of secure retirements from properly funded pensions, an economic lifeline for retirees and their families.

For the last nine years, I have had the honor of serving on the IAFF Local 717 Executive Board and Pension Board where I work closely with firefighters’ widows to ensure they continue to receive the benefits they deserve after losing their spouse. It has been an eye-opening experience. Due to the fact that firefighters do not receive Social Security, these pension benefits become their sole source of income. Without the pension benefits, first responders’ families could be left destitute and entirely reliant upon state funds and charity for their most basic needs.

During my time on the Pension Board, the Cicero Firefighters Pension Fund has seen a 47% increase in its asset portfolio. This is attributable to a good rapport with the Town of Cicero and establishing actuarially-sound funding principles. In 2022, the assets of our pension fund, and all other police and fire pension funds in the state besides the City of Chicago’s, were consolidated for investment purposes with control given to a single board of trustees. The thought is that a larger, centralized pool of money will decrease costs and ultimately provide better investment returns. While it is too early to tell if this strategy will work, the fact that the legislation was the result of bipartisan efforts is proof that both sides can work toward the common goal of providing a sustainable and resilient pension system for emergency responders across Illinois.

Notwithstanding my optimism, there is a great deal of misinformation circulating about retirement for public workers. Many try to claim the “lavish” benefits are the root of the problem. However, there is a significant amount of data showing this not to be the case. In fact, as discussed in greater detail below, pensions have been shown to have a net positive return on investment in our communities. Furthermore, firefighters –and most public sector workers– do not receive Social Security benefits, so their pension benefits are the sole source of their retirement income. Instead, the vast majority of research points to improper funding by the employer as the root cause of pensions being underfunded.

Public pensions are funded by three sources: employer contributions, employee contributions, and investment returns. Teachers, firefighters, and other public employees contribute a portion of every paycheck toward their pension during their working years. Over time, if properly funded, it was the intent that the investment income earned by the fund would cover the benefits. The amount contributed by the employee is a fixed percentage and the investment returns are market-dependent and therefore variable. The only funding source which can be manipulated is the employer contribution as it is subject to and calculated based upon certain actuarial assumptions and valuation methods. Under many pension statutes, including that of police and firefighters not employed by Chicago, the municipalities are able to choose which actuary and, by proxy, which actuarial assumptions, determine the employer’s annual contribution. The decades long, bad-faith manipulation of these actuarial inputs, done solely with the purpose of decreasing the amount contributed by the employer, has done the most damage to pension funding.

Pensions are a powerful economic driver for our local communities, supporting small businesses and creating jobs. In Illinois, retired public employee spending from pensions helps to support over $30 billion in economic output, nearly 180,000 jobs, and $4.7 billion in federal, state, and local tax revenues. Pension benefits are a good deal for the economy and for taxpayers. Each dollar “invested” by Illinois taxpayers (employers) in these plans supported $4.86 in total economic activity in the state. Put another way, pensions provide Illinoisans a good return on investment.

When one takes a step back and looks at the facts, it is clear that prioritizing sustainable solutions for pensions of public workers makes good financial sense. It is up to each of us to contact our elected officials and ensure they are responsible stewards of our tax dollars. Economists and experts agree: retirement security and pensions for public employees is a proven investment in our local communities. We owe it to our families, our first responders, and our communities’ futures.